New investment bank launched

With the launch of the Asian Infrastructure Investment Bank (AIIB), a further financial resource is going to be created for infrastructure projects in rural regions on the 29th June. While the new institution is conceived mainly for the Asian region, majority shareholder China also seeks involvement in projects globally.

One of the Asian Infrastructure Investment Bank projects was already selected a while ago. AIIB funding is to support the modernisation of the old Silk Road to link up rural areas with new distribution channels. The 57 founding nations will only be giving their signature for bank’s official go-ahead at a meeting in Beijing, China, on the 29th June. With its 4.1 per cent share of votes, Germany is to be the fourth largest shareholder after China, India and Russia. Jin Liqun is expected to become the first AIIB Chairman, having previously been Vice-President of the Asian Development Bank.

In addition to the World Bank and the Asian Development Bank, and with the New Development Bank of the BRICS countries, also to be launched next month, planners of infrastructure projects now have two new contacts. The AIIB should above all be of interest for emerging economies, which have so far had difficulty covering their demand for the loans they need for infrastructure projects. Former World Bank President Robert Zoellick is critical of the USA’s keeping clear of the AIIB, which he sees as its fear of losing its claim to leadership of a US-dominated world economy. After the collapse of the Soviet Union, the emergence of a new regional bank ought to be seen more as an emancipatory step. The Financial Times maintains that the world economic crisis in 2007 and 2008 also had such a severe impact because there was no alternative to the Western economy. The AIIB offers fast-growing emerging economies a source of finance outside the Western development path. In addition, 13 European Union countries are to support bank lending conditional on compliance with social and ecological standards.

Germany’s Federal Ministry for Economic Cooperation and Development (BMZ) also sees good prospects for the bank, especially given that more than 1.6 billion people in Asia are still having to live on less than two US dollars a day.

“There is an immense need for infrastructure financing, which is still not being met by the existing institutions,” a spokeswoman for the BMZ told Rural 21, adding that the AIIB would fit in with the existing institutional scene. “Given the parallelism of existing mandates, prospective AIIB President Jin has already agreed to closely co-operate with the Asian Development Bank and the World Bank,” the spokeswoman continued. “The AIIB is going to operate mainly in developing countries and will make an important contribution to promoting development, with the needs of less developed countries in the region being given special consideration.” The AIIB, too, will have to deal with combining public and private capital. Therefore, the spokeswoman explained, “the AIIB is going to gain considerable significance in the medium to long term”.

Germany is aware of its role and that of twelve other EU States in making efforts to achieve the balanced decisions that AIIB advocates are hoping for. Therefore, the BMZ spokeswoman maintained, the membership of the EU States allowed for “influencing business policy via the supervisory committees and insisting on supporting investment in infrastructure that really promotes development”.